Please ensure Javascript is enabled for purposes of website accessibility

Can Boston Beer Co Inc Remain Relevant as a Craft Brewer?

By Nicholas Rossolillo – Mar 24, 2016 at 3:25PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The maker of Samuel Adams has become a big name in the beer world. Can the company still claim its coveted status as a craft brewer?

Source: Samuel Adams

The craft brewing category has become big business. All over the country, small brewers pop up offering beer drinkers a better alternative to the stereotypical watered-down, mass-brewed refreshment. Boston Beer Company (SAM 0.89%), the maker of Samuel Adams beer, is the self-proclaimed -- and by many craft brew enthusiasts' admission -- founder of the American craft brew revolution.

With annual volume now topping 4,000 barrels and revenue exceeding $1 billion in 2015, can the maker of Samuel Adams still be considered a genuine craft brewer? What impact will this status have on the business going forward?

What is a craft brewer?
So what exactly does it take to be called a "craft" brewing company? Ask beer aficionados, and you'll probably get a different answer each time. As with many other things that rely on subjective preference, there is no accounting for taste.

Despite this fact, the National Brewers Association has come up with a definition of "craft" beer. In its current state, the definition says a "craft" brewery is small (annual production of less than six million barrels), independent (owned 25% or less by a non-craft brewer), and traditional (majority of product is made using traditional or innovative ingredients and methods). The Boston Beer Company technically fits within this framework, but it certainly flirts with the gray area in many consumers' minds. For example, a few years ago, the Brewers Association defined "craft" as less than two million barrels of production, but when Boston Beer exceeded that figure, the number was increased to six million barrels.

With the Samuel Adams maker now valued at well over $2 billion in market capitalization and a multitude of small brewing start-ups popping up all over the country -- there are over 2,000 microbreweries or regional breweries in the U.S. -- what do sales numbers indicate about the popularity of Boston Beer offerings?

The beer industry by the numbers
In the past couple of years, overall beer sales have been flat. At the same time, craft brew sales have grown by double digits, and craft beer now owns over 20% of total domestic sales. What effect has this trend had on Boston Beer and, for the sake of comparison, the largest U.S. producer, Anheuser-Busch InBev (BUD 0.37%)?


The Boston Beer Company

Anheuser-Busch InBev

2014 revenue

$0.97 billion

$47.1 billion

2015 revenue

$1.02 billion

$43.6 billion

2016 average expected revenue

$1.00 billion

$42.8 billion

2014 earnings per share



2015 earnings per share



2016 average expected earnings per share



Source: Boston Beer Company and Anheuser-Busch InBev 2015 reports and Yahoo! Finance 

The figures listed in the chart are consistent with the fact that, in this flat domestic beer sales environment, big producers are losing market share to the little guy. Boston Beer Company has managed to generate ever higher profits in spite of flattening sales in recent years. If the sales numbers continue to be stagnant over time, however, investors can expect profits to eventually follow suit. How can the company avoid following in the wake of bigger producers?

Keeping up appearances
As consumers continue to alter their consumption habits and Samuel Adams' image as a craft beer fades, Boston Beer will be increasingly tasked with recapturing the growth it previously enjoyed. One way in which the company has tried to do so is with new brand start-ups and acquisitions. For example, Twisted Tea, Angry Orchard, and Rebel IPA are beverage brands under the Boston Beer umbrella, but in many ways, they have been able to retain a separate identity and image from the core Samuel Adams business.

Boston Beer is not alone in its struggle to regain growth. Other big companies in the consumer goods sector have had to stave off smaller competitors in recent years (think of the fast food industry, for example). I believe that big corporations, the Sam Adams beer maker included, can fight against the transition to small, local, or regional businesses by adding such companies to their portfolios. This type of business model allows the small subsidiary the flexibility to operate independently, make decisions tailored to their specific market, and retain its image as a distinct brand.

Jim Koch, founder and CEO of Boston Beer, likes to point out in quarterly earnings his company's unique position to be able to invest in the future. I believe that investments in small brands and craft brews, whether existing or new wholly owned subsidiaries, is one way the company can sustain growth. With this model, Boston Beer would also be able to evolve with a changing business environment while still holding on to its title as the nation's largest craft brewery.

Nicholas Rossolillo has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Boston Beer. The Motley Fool recommends Anheuser-Busch InBev NV. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Boston Beer Stock Quote
Boston Beer
$377.07 (0.89%) $3.31
Anheuser-Busch InBev NV Stock Quote
Anheuser-Busch InBev NV
$56.59 (0.37%) $0.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.